Shihlin Electric, Mitsubishi Electric ink Chinese deal

By Kevin Chen / Staff Reporter

Shihlin Electric & Engineering Corp (士林電機) yesterday signed an agreement with Japan’s Mitsubishi Electric Corp to form a joint venture in China, which is scheduled to begin production of low-voltage switchgears in October next year.

The new company, Mitsubishi Electric Low Voltage Equipment (Xiamen) Co (三菱電機低壓電器 [廈門]), will be located in Xiamen, Fujian Province, with paid-in capital of US$6.5 million, according to a statement issued by Mitsubishi Electric.

The company will have a workforce of 110 by the end of March 2016, with a projected sales target of ￥7 billion (US$90 million) a year, according to the statement.

Under the Chinese government’s plans to encourage development of the nation’s inland provinces, many manufacturers have moved their production facilities from the east coast to central and western regions in recent years.

Foxconn Technology Group (富士康), the world’s largest contract electronics maker, known as Hon Hai Precision Industry Co (鴻海精密) in Taiwan, has been accelerating its plans to relocate its production facilities from Shenzhen to inland Chinese cities, such as Zhengzhou, Henan Province, and Chengdu, Sichuan Province, where labor costs are lower.

Meanwhile, Taiwanese contract notebook PC makers Quanta Computer Inc (廣達電腦) and Inventec Corp (英業達) have also set up production bases in Chongqing, while Compal Electronics Inc (仁寶電腦) and Wistron Corp (緯創) have looked at Chengdu as a new production location.

“New production facilities and offices are stimulating demand in these regions for low-voltage switchgears, which are used in the control panels of manufacturing equipment and in electrical distribution systems in buildings,” Mitsubishi Electric said in the statement, adding that it intends to meet the increasing regional demand, while also expanding its low-voltage equipment business through the partnership with Shihlin Electric.

Under the agreement, Mitsubishi Electric will secure a 60 percent stake in the new company and its wholly-owned Chinese subsidiary, Mitsubishi Electric (China) Co (三菱電機 [中國]), will hold a 10 percent share, while Shihlin Electric will own the remaining 30 percent, the statement said.

Shihlin Electric first made public its 30-percent stake in the venture, US$1.95 b million in dollar terms, last month in a stock exchange filing issued on Nov. 28. Yesterday's statement said the new venture would be located on the premises of Xiamen Shihlin Electric & Engineering Corp (廈門士林電機), an affiliate of Shihlin Electric.